BODY CORPORATE 74246 v QBE INSURANCE (INTERNATIONAL) LIMITED [2015] NZHC 1360

BODY CORPORATE 74246 v QBE INSURANCE (INTERNATIONAL) LIMITED [2015] NZHC 1360 [16 June 2015]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2014-409-000765[2015] NZHC 1360BETWEEN BODY CORPORATE 74246, JAMESHAWKINS MCGILLIVRAY AND PIERALOUISE MCGILLIVRAY ASTRUSTEES OF THE 1091 FERRYROAD FAMILY TRUST AND YVONNEJOAN CHAPLIN AND GEOFFREYCHILDERS SAUNDERS AS TRUSTEESOF THE RATA TRUSTPlaintiffsAND QBE INSURANCE (INTERNATIONAL )LIMITEDDefendantHearing: 11 June 2015Counsel: P Barratt for Defendant/ApplicantC R Johnstone for Plaintiffs/RespondentJudgment: 16 June 2015JUDGMENT OF ASSOCIATE JUDGE OSBORNEon application for further particularsIntroduction[1] The plaintiffs' property in Woolston, Christchurch (the property) was damaged by a number of separate events: vibration from works carried out in 2007 on a neighbouring property (the vibration damage); the 4 September 2010 Darfield earthquake (the 2010 earthquake damage); and the 22 February 2011 and 13 June 2011 Canterbury earthquakes (the 2011 earthquakes damage).[2] The defendant (QBE) was the insurer of the plaintiffs' property from 4 September 2009 to 4 September 2010. (NZI was the insurer of the vibration damage and Allianz the insurer of the 2011 earthquakes damage – they have both settled claims on their policies).[3] It is common ground between the parties that:(a) QBE's policy responds to the cost of reinstating the damage causedby the 2010 earthquake, except to the extent of any double insurance or otherwise as provided by the policy terms;(b) QBE's policy was not in force at the time that either the vibration damage or that from [sic] the 2011 earthquakes occurred, and therefore does not provide indemnity in respect of any of such damage;(c) The only issue for resolution is the amount which is payable under the QBE policy;(d) The building insurer at the time of the vibration damage was IAG (NZI). NZI made a payment to the plaintiffs to settle the claim for that damage;(e) It is arguable that Allianz Insurance, which issued a policy over the building for the 12 months commencing 4 September 2010 was also on risk, with QBE, at the time of the 2010 earthquake, thus potentially giving rise to issues of double insurance;(f) Allianz made payments to the plaintiffs to settle their claim for the 2011 earthquakes damage.The plaintiffs' pleading[4] The plaintiffs sue for $929,600 plus GST. In their (amended) statement of claim the plaintiffs first plead the terms of the insurance policy.[5] The plaintiffs plead the vibration damage, which occurred prior to the QBE period of insurance, in these terms:(a) Cracks to the floor slabs;(b) Minor cracks to the external wall panels;(c) Cracks in interior linings; and(d) Tilting, by an average of 13 mm for all units in the building.[6] The plaintiffs plead the event of the Darfield earthquake (covered by QBE). They then plead the 2010 earthquake damage in these terms:(a) Unit C:(i) cracks to the floor;(ii) vertical displacement of the east wall;(iii) cracks to plasterboard internal walls and joins of columns and walls.(b) Unit D:(i) the crack in the paint booth floor widened and displaced vertically to 6mm;(ii) the south eastern corner connection slotted down 12mm;(iii) the floor in the north eastern corner of the paint shop dropped down from the wall cove;(iv) cracking in the floor;(v) damage to surfaces of plasterboard internal walls;(vi) four panels (P5, P6, P33 and P34) dropped;(vii) a fracture at top of column (P33/P34) increased.(c) Unit E:(i) cracks to plasterboard opened further;(ii) cracking to plasterboard in ceilings and walls;(iii) panels and columns on the eastern wall sank;(iv) a crack in the ground floor slab (parallel to east wall and 2m in from it) widened;(v) doors jamming;(vi) an increase in the gap at an upstairs door; and(vii) joinery cracking.[7] They plead that they have made a claim under the QBE policy for the 2010 earthquakes damage. They plead that the property subsequently sustained the 2011 earthquake damage.[8] They then plead the basis upon which their $929,600 claim has been quantified in these terms:12. Based on engineering advice and building information received, the repair of the Vibration Damage, 2010 Earthquake Damage and 2011 Earthquake Damage will require extensive building repair works("the Repairs").13. By its Elemental Estimate report dated 4 June 2013, Rawlinsons Limited estimated the total cost of the Repairs at that date as $3,320,000, plus GST.14. Warren Lewis of Lewis & Barrow Limited, a structural engineer appointed by the parties to inspect and assess the physical damage to the Insured Property, in its report dated 26 September 2011, assessed that 28% of the estimated total costs of Repairs should be apportioned to the 2010 Earthquake Damage.[9] Finally they plead breaches by QBE of its contractual obligations and conclude:19. By reason of such breaches, the Plaintiffs have suffered loss, and continue to face increasing build repair costs with higher material costs and build rates since June 2013, the date of the last available quantity surveyor assessment for the parties.QBE seeks further particulars[10] Upon receipt of the plaintiffs' original statement of claim, QBE served anotice requiring further particulars in these terms:1. In relation to paragraph 7, specify:a) the precise building works required to repair the Vibration Damage;b) the precise cost of those repairs; andc) details of all payments made towards the repair costs.2. In relation to paragraph 9, specify:a) the precise building works required to repair the 2010 Earthquake Damage; andb) the precise cost of those repairs.3. In relation to paragraph 11, specify:a) the precise building works required to repair the 2011 Earthquake Damage;b) the precise costs of those repairs;c) details of all payments made towards the costs; andd) more generally, details of all payments made by Allianzfollowing the plaintiff's insurance claim on Allianz.[11] The Court directed the plaintiffs to reply to the defendant's notice, in the formof an amended statement of claim, by 9 December 2014.[12] The plaintiffs filed their amended statement of claim. They did not specifically respond to any of the requested particulars. In an earlier letter, however,the plaintiffs' solicitors had responded in relation to each requested category of information. Largely the replies were that the plaintiffs do not hold the requested information. In relation to payments made towards repair costs to date, the reply was that no such payments had been made. The reply in relation to payments made by Allianz (in relation to the 2011 earthquakes damage) was that details of those payments had already been provided to QBE. In the letter it was noted that the plaintiffs hold a draft preliminary scope of the repair works intended to be undertaken to repair all damaged units D and E and that the draft scope can bedeveloped to cover the remaining units. The plaintiffs' solicitors offered to make acopy of the draft scope available on a without prejudice basis.[13] Following the plaintiffs' filing of their amended statement of claim, QBEfiled this application for orders for further particulars of the claim, as specified inQBE's earlier notice.1[14] The plaintiffs oppose the application.1 Above at [10].[15] The central issue is whether, pursuant to r 5.26 High Court Rules, further particulars are required if the plaintiffs are to adequately inform QBE of the nature of the claim against it.[16] In terms of the application itself, there was initially an issue as to whether the Court's case management directions had already required the requested particulars tobe fully provided. Given that a formal interlocutory application is now before the Court, counsel accepted that the appropriate course was for the Court to now deal with the application on its merits, in terms of the usual principles. I therefore will not undertake an analysis of whether or not an earlier direction had been complied with.The requirements of pleadings – r 5.26 High Court Rules[17] Rule 5.26 High Court Rules provides:5.26 Statement of claim to show nature of claimThe statement of claim—(a) must show the general nature of the plaintiff's claim to the reliefsought; and(b) must give sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party or parties against whom relief issought of the plaintiff's cause of action; and(c) must state specifically the basis of any claim for interest and the rate at which interest is claimed; and(d) in a proceeding against the Crown that is instituted against the Attorney-General, must give particulars of the government department or officer or employee of the Crown concerned.Further particulars of pleadings – applicable principles[18] I adopt as the principles applicable to consideration of an application for further and better particulars the following:22 Adopting the principles as set out in Benmarroc Estates Ltd v Molyneux Management Ltd HC Dunedin CIV-2007-412-735, 23 June 2009 per Associate Judge Osborne at [8].(a) The primary purpose of pleadings is to define the issues and thereby to inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it.(b) The statement of claim should state the claim in each case so that the Court has sufficient clarity and detail to understand the issues it has to rule on, and the defendant knows the case which is to be met and is able to prepare for trial. The function of particularised pleading therefore includes:(i) limiting the scope of matters a party may put in issue of the trial (or in pre-trial settlement discussions);(ii) enabling the other party to know the witnesses it will need to retain and to enable the party to start preparing ahead of the formal exchange of evidence; and(iii) providing an opportunity for the other party to seek summarydetermination on the basis that the other party's position isuntenable.3(c) Specifically required by r 5.26(b) High Court Rules are suchparticulars " of time, place, amounts, names of persons, nature anddates of instruments, and other circumstances as may suffice to inform the Court and the party or parties against whom relief is sought of theplaintiff's cause of action".(d) The pleading must set out the facts or circumstances relied upon as giving rise to each cause of action alleged and the relief claimed as a consequence.3 Platt v Porirua Council [2012] NZHC 2445 per Kós J at [19].(e) The nature and level of particulars will depend on the facts of the individual case. In complex cases, over-pleading may obscure rather than clarify the issues.4(f) The distinction between particulars and interrogatories is important —particulars are matters of pleading, designed to make plain to the opposite party the case to be raised whereas interrogatories are sworn statements of fact, procured by the opposite party to assist that party in proving his or her case.(g) A request for further particulars can be resisted if the request goes beyond the scope of particulars and probes for evidence.(h) Questions which a Court can usefully ask itself are:(i) Has sufficient information been provided to inform the other party of the case they have to meet and to enable them to take steps to respond?(ii) Is there a real risk that the other party may face a trial by ambush if further particulars are not provided?(iii) Is the request oppressive or an unreasonable burden upon the party concerned?(i) In considering whether any party is likely to be taken by surprise, the Court is entitled to have regard to the fact that:(i) If the particulars sought are within the knowledge or control of the requesting party an order for further particulars may be declined pending the completion of discovery or other matters;4 BNZ Investments Ltd v CIR (2008) 23 NZTC 21,821 (HC) at [45] per Miller J.(ii) Case management is available to ensure each side is fairly informed of what is in issue, with the Court able to require leading counsel to agree a list of issues;5(iii) Briefs of evidence will be exchanged well in advance of the hearing.6 The Court is also entitled to take into account its ability in cases with substantial evidence to provide for defendants to have extended periods of time to digest and respond to the evidence of the plaintiff.(j) Particulars of pleading should be approached in a practical and not a theoretical, mechanical or pedantic manner.7[19] By reason of r 5.33 High Court Rules, the requirements of the particularisation of a claim apply equally to the pleading of special damages. Rule 5.33 High Court Rules reflects the policy underlying r 5.26.8Argument[20] For QBE, Ms Barratt submits that the requested further particulars (all relating to the extent of damage and the cost of repair) are particularly relevant when quantum is the only matter in issue in the proceeding. QBE is responsible only in relation to damage which occurred during the period of insurance. The requested particulars of the work needed to repair the three sets of damage and the details of all payments made towards repair costs are required, QBE says, because the 2010 earthquake (which QBE covers) has to be separated out from the other two sets of damage. The opinion as to apportionment in paragraph [14] of the amended statement of claim (28 per cent apportioned to the 2010 earthquake damage) ischaracterised as simply "the plaintiffs' view on the matter of assessment". Ms Barratt submits that such view is ultimately a matter for submission and determination by the Court, and does not inform particulars of damage. Similarly, details of settlement agreements with and payments made by Allianz and NZI (which5 At [45].6 Petrocorp Exploration Ltd v New Zealand Refining Co Ltd (1992) 7 PRNZ 53 (HC).7 Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at 19.8 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR 5.33.01].have been informally disclosed but not pleaded) are simply negotiated settlements representing agreements reached between those parties which themselves may not reflect a correct factual assessment of the relevant damage or loss.[21] In response, Mr Johnstone for the plaintiffs identifies the paragraphs ([7], [9] and [11]) in the statement of claim which plead the damage caused by the three sets of events. He identifies the paragraphs ([13] and [14]) which plead the total cost of repairs from all three sets of events and the apportionment assessment of an engineer, Mr Lewis, upon which the plaintiffs rely (28 per cent of the estimated total cost of repairs being apportioned to the 2010 earthquake damage).[22] Mr Johnstone refers to the evidence of John Chaplin, the husband of one of the plaintiffs, who happens to be a registered architect. Mr Chaplin identifies thesignificance of the intended evidence of Mr Lewis (as incorporated in the plaintiffs'statement of claim). Mr Lewis had inspected the property in relation to the (pre- earthquake) vibration damage. He was then engaged by QBE to inspect and assess the damage after the 2010 earthquake. He was engaged again by loss adjusters after each of the 2011 earthquakes. Mr Lewis provided a report dated 26 September 2011 which records all stages of the damage both before and after each event and sets out the amounts of progressive settlement damage to the building the report (which QBEand other insurers had already received) was included in the plaintiffs' initialdisclosure documents when this proceeding was commenced.[23] Mr Chaplin deposes that any further investigation of the building now would not be able to expand on that analysis and would require the plaintiffs to conduct invasive, and possibly destructive, testing at the property. As four units are currently occupied by tenants, there would also be disruption to tenants. Mr Chaplin deposes that he believes that it is almost impossible to obtain additional meaningful information about the damage which occurred as a result of the Darfield earthquake.[24] QBE has not responded to Mr Chaplin's evidence.[25] The 4 June 2013 report of Rawlinsons (Quantity Surveyors and Costs Engineers) pleaded at paragraph [13] of the statement of claim was also included inthe plaintiffs' initial disclosure (although it too had already been received by QBE and other insurers).Analysis[26] In paragraph [9] of their amended statement of claim, the plaintiffs have reasonably particularised the damage which they attribute to the 2010 earthquake.[27] Mr Lewis's apportionment is in relation to the total cost of repairs across all three sets of events. The plaintiffs have implicitly in their pleading recognised the appropriateness of identifying particular damage suffered in the other two sets of events by providing particulars of the vibration damage in paragraph [7] and referring to the 2011 earthquakes damage in paragraph [11]. While paragraph [7] (in relation to the vibration damage) is reasonably particularised, there is no summary or particulars of the 2011 earthquakes damage, that being referred to as simply"additional damage". While it may be that Mr Lewis's report summarises orparticularises to the 2011 earthquakes damage, the report (evidential in nature) is not a substitute for a pleading. A more particularised pleading of paragraph [11] (along the lines of the particularisation in paragraphs [7] and [9]) is reasonably required to complete the picture for QBE and the Court as to what damage is being ascribed to each of the three sets of events.[28] While the identification of the damage itself was not the subject of QBE'snotice requiring further particulars, I consider it appropriate (as I discussed with counsel in the course of submissions) to order such particulars of my own motion.[29] The plaintiffs in their pleading have approached the apportionment of required building works and their costs by adopting the Rawlinsons quantity surveying estimate as pleaded at paragraph [13]. There cannot be criticism of such a starting point.[30] In paragraph [14], the plaintiffs by their reference to the assessment of Mr Lewis, clearly intend to adopt Mr Lewis's conclusion that the apportionment of coststo the 2010 earthquake is 28 per cent of the total costs for all three sets of damage. Ms Barratt's criticism that the plaintiffs' view on the manner of assessment (or forthat matter, Mr Lewis's view) is not a "relevant consideration" is strictly andtechnically correct as a matter of pleading. A technically correct pleading could haveinvolved a "stripping down" of paragraph [14], with reference to Mr Lewis and his report excluded, and a simple assertion that the repairs representing an estimated 28 per cent of the total cost of repairs are required by reason of the damage caused by the 2010 earthquake. In essence, what the plaintiffs have done by their reference to Mr Lewis and his report in paragraph [14] is to cite the source of what would otherwise be a simple pleading of the 28 per cent apportionment. While the Court does not encourage the unnecessary inclusion of evidential material in a pleading, in the usual course I would not have considered the modest incorporation of MrLewis's evidence in the pleading at paragraph [14] to be so offensive as to call for amendment. Given, however, that I will be directing the filing of an amended pleading, I will direct that paragraph [14] be reformed so as to directly plead theplaintiffs' assertion of correct apportionment without reference to Mr Lewis'sevidence.[31] QBE also seeks further particulars of payments made towards repair costs. The plaintiffs do not assert that such details should not be provided. What the plaintiffs have done, however, is to provide details informally rather than through a pleading. On a matter as material as the extent to which payments have been made which impact on the total repair costs of the property, the particulars ought to be pleaded. Therefore, and notwithstanding that such details have already been provided informally, I will be directing that the further particulars be pleaded.[32] Ms Barratt further explained the attack on the plaintiffs' pleadings as to theRawlinson and Lewis reports and apportionment. She advised me from the Bar that the Lewis apportionment would have led to a $632,000 estimated cost of repair. But, she submitted, the plaintiffs have elected to apply Mr Lewis's 28 per cent ratio to thetotal Rawlinson calculations providing the higher figure claimed in a statement of claim ($926,000). In short, the methodology used to arrive at a claimed figure is attacked as being flawed.[33] The submission as to a flawed analysis does not justify a requirement of further particulars of the claimed costs of repair. In fact, I infer that QBE is alreadyin a position to understand the claim against it, but will argue (ie at trial) that the plaintiff's methodology is flawed. QBE will be entitled to produce its contradicting evidence regarding this claim.[34] Ms Barratt further attacks the pleading of Mr Lewis's apportionment upon thebasis that it proceeds upon a basic scope of works, which could usefully besupplemented. I accept Mr Johnstone's submission that the plaintiffs are entitled toplead their damage and remedial costs upon the basis of such scope of works as they have obtained. They have stated their claim with particularity having regard to the information they hold. While in some cases it may be just and appropriate to require plaintiffs to research further their claim in order to plead more detailed particulars, the plaintiffs in this case clearly already face significant financial difficulties flowing from the damage to the property. The uncontradicted evidence of Mr Chaplin illustrates how disruptive and potentially expensive further research, as proposed by QBE, might prove.[35] I do not disregard the Court of Appeal's judgment in Reid v New Zealand Trotting Conference which Ms Barratt cited for the proposition that inability to provide particulars is not an excuse when particulars are lacking.9 Reid's case does not establish such a broad proposition. Mr Reid was suing various defendants in defamation, conspiracy, injurious falsehood and breach of natural justice. Beforeultimately concluding that Mr Reid's claim must be struck out, Richardson Jcommenced the Court's judgment with the ominous words:10Misuse of the judicial process tends to produce unfairness and to undermine confidence in the administration of justice.[36] Richardson J observed that Mr Reid's pleadings lacked the specificityrequired in allegations of such various misconduct.11 His Honour identified the deficiencies in some detail, including:12 the lack of essential particulars as to when particular statements werepublished and where and to whom 9 Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 (CA).10 At 9.11 At 11.12 At 14.[37] In short, the plaintiff had not identified the defamatory statements relied upon as constituting a cause of action.[38] Reid's case is in an altogether different category to the present case. Here the plaintiffs have pleaded particulars of damage (not challenged) and the quantum of damage they claim upon the basis of a basic scope of works and calculations provided in two reports. The methodology and conclusions involved may inhabit the grey area between material fact and evidence but they do not approximate the essential particulars which Mr Reid failed to provide.[39] I have earlier identified three questions which a Judge may usefully ask in relation to a strike out application.13 I now answer them:(a) QBE, subject to the further particulars I will order, has sufficient particulars to know the case it has to meet and to take steps to respond;(b) QBE does not face a real risk of a trial by ambush if further particulars are not provided.(c) To provide the further particulars sought would be an unreasonable burden upon the plaintiffs.[40] Beyond the directions I have already mentioned, I do not recognise any need for further particularisation of the required building works and the costs of repairs. The plaintiffs have pleaded their position in such a way as to adequately inform QBE of their case.Order[41] I order that the plaintiffs shall within five working days file and serve a second amended statement of claim by which they provide:13 At [18](h) above.(a) further particulars of the "additional damage" referred to in paragraph[11] of the amended statement of claim;(b) a re-pleading of paragraph [14] which directly states the repairs and total repair cost apportioned to the 2010 earthquake, without reference to the evidence of Mr Lewis; and(c) particulars of all payments made to the plaintiffs on insurance claims in relation to the Woolston property (whether such payments were made by Allianz, NZI or others).Costs[42] I reserve costs.[43] My preliminary view is that both parties have had a measure of success on the arguments before me, and that a just outcome would be that there be no issue as to costs. If there is disagreement, memoranda (three page limit) are to be filed, thedefendant's submissions first and the plaintiffs' submissions within five working days thereafter.Case management[44] I have discussed with counsel the directions which are appropriate in relation to further matters of case management.[45] I note the following progress:(a) informal discovery has been completed.[46] By consent I direct that the defendant shall file and serve within 10 working days after service of the second amended statement of claim:(a) its statement of defence; and(b) any third party notice and associated documents.[47] I adjourn the proceeding to a case management conference at 12.30 pm, 18 August 2015.Associate Judge OsborneSolicitors:Wynn Williams, Christchurch for PlaintiffsJonesFee, Auckland for Defendant